IMF loan arrangement earns B3 credit rating for Egypt

Moody’s Investors Service has affirmed Egypt’s B3 credit rating, citing the country’s initial agreement with IMF for a $12 billion loan as credit-positive, the ratings agency said on Saturday. Moody’s said it maintained the country’s B3 rating, six levels below investment grade, because of the government’s weak finances, external payments position and security concerns. Egypt’s […]

Moody’s Investors Service has affirmed Egypt’s B3 credit rating, citing the country’s initial agreement with IMF for a $12 billion loan as credit-positive, the ratings agency said on Saturday.

Moody’s said it maintained the country’s B3 rating, six levels below investment grade, because of the government’s weak finances, external payments position and security concerns. Egypt’s outlook remained stable.

“The stable rating outlook reflects Moody’s view that despite the somewhat slower-than-expected implementation of fiscal and economic reforms over the past 12-18 months, upward and downward pressures on the rating are balanced,” said Moody’s.

Egypt this month reached a preliminary agreement with the IMF to secure a three-year facility that will help to alleviate the widening fiscal deficit and support the government’s reform programme.

The deal is subject to approval by the IMF executive committee, which is expected to meet in the coming weeks.

“In Moody’s view, the agreement reached with the IMF is also important because it will unlock external funding from other multilateral and bilateral sources, and support the implementation of fiscal and economic reforms,” the ratings agency said.

Egypt’s reform agenda includes the introduction of a value-added tax.

The IMF programme will help Egypt plug the fiscal deficit, lower government debt and raise growth to help create jobs.

The IMF plan aims to help Egypt trim its government debt to 88 per cent of GDP in the 2018-19 fiscal year, from 98 per cent in the 2015-16 fiscal year.

The IMF has also called on Egypt to adopt a flexible exchange rate regime, boost its foreign reserves and bring down inflation.

Foreign currency reserves have dwindled because of lower tourism receipts and foreign investments since the 2011 political uprising in Egypt.

In May, S&P Global Ratings cut Egypt’s credit outlook to negative from stable, citing the country’s external and fiscal vulnerabilities, which might intensify over the next 12 months. S&P maintained its B minus rating for Egypt.